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I am a private investor residing in Singapore. I am interested in all kinds of markets and assets but my current views are that very few assets are currently undervalued at the moment. The only market that I know that is clearly undervalued with good/improving fundamentals is Vietnam. Therefore,... More
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Vietnam Stock Trading and Value Investing
  • How To Buy Vietnamese Stocks Directly 4 comments
    Apr 10, 2012 8:02 PM | about stocks: EEM, VNM

    This is a follow-up post to my previous article on my thoughts on the Market Vectors Vietnam ETF (VNM). The Vietnam ETF is a good trading vehicle for Vietnamese stocks but you got to time your entry and exit well. Like most of the ETFs that I know, these are trading vehicles that are mainly targeted at traders. If you are fast and able to spot the exact turning points in the sentiment towards emerging markets (EEM), VNM will be a good vehicle.

    However if you are really keen on investing in Vietnam and are a long term investor, it may prove to be worth your trouble to open a stock trading account and buy Vietnamese stocks directly.

    It is actually quite easy to buy Vietnamese stocks directly and it is not necessary to make a trip to Vietnam to do this. Any foreigner can do so by opening a stock account in a local brokerage firm without ever having set foot in Vietnam. In fact, there is a growing group of foreigners that have been investing in Vietnam. A recent article in the Vietnamese newspapers says this and I quote:

    Till March 31, 2012, Vietnam Securities Depository Centre (VSD) has granted transaction codes for 15,687 foreign investors, including 1,791 institutional investors and 13,896 individual investors.

    In March along, VSD has granted transaction codes for 54 foreign players including 28 institutions and 26 individuals.

    Vietnam Securities Depository Centre (VSD) is the central body that regulates the buying and selling of securities. In Vietnam, every investor has a unique trading code and is not allowed to have more than one stock account at any one time. Even institutions are not allowed to have more than one account each. Hence, it is easy to see how many foreign investors are there. If there are 15,687 transaction codes, then there are 15,687 foreign investors in total in Vietnam. Other unique aspects of the market I have addressed in this FAQ.

    Taxes

    First let's talk about taxes. There is a 5% tax on dividends. There is also capital gains tax. You can choose among two ways of paying capital gains taxes. You can either:
    1. Pay 0.1% of the value of each transaction, or;
    2. Pay 25% on annual profit at the end of the year.

    Obviously, option 1 is much easier to calculate so this is the option that most investors choose.

    There are many securities firms in Vietnam and new ones are being opened every so often. Competition among the securities firms is fierce. As a result, trading commissions are quite affordable, about 0.2% or so of the value of the trade and most firms will waive all other charges (e.g. account opening, custodian etc.). Currently, the stock market in Vietnam is very depressed and hence, the securities firms will be very grateful for your business and will likely provide you with excellent service. Usually this "service" will also include free tips on the various "hot" stocks. Obviously, I would not be able to give advice on how good these tips are however, so caveat emptor!

    I suggest that you stick to the larger securities firms in Vietnam as these companies have more resources and usually the internet trading platform will be less buggy.

    Shameless plug: In my blog under the title of "Brokerages", you will be able to find a list of brokerages that are available in Vietnam. Please note that I am neither affiliated to any brokerage firm nor am I recommending any of them just by listing their information on my blog.

    The list is certainly not exhaustive but I have tried to focus on the larger firms with the most resources. Hopefully you will find the list useful. Do check back often as I will add more firms when I find out more information about them.

    To open a trading account, there are only 2 steps:

    Step 1: Obtain a trading code at Vietnam Securities Depository Centre (VSD)

    Documents needed at this stage (securities firms will provide you with these documents) are:

    1. Account opening request in the securities firm that you choose (1 copy).
    2. Application for securities trading code (1 copy).
    3. Letter of good conduct/good standing (1 copy). This has to be certified by the Notary public and then legalized by the Vietnamese Embassy/Consulate in your country. If this is in English, a translation needs to be provided. This translation can be done and legalized in the Vietnamese Embassy/Consulate as well. (It cost me about USD10 nearly 10 years ago but I don't know how much it is now.)
    4. Photocopy of your passport (1 copy). This also has to be certified true copy by the Notary public as well.

    Step 2: Open a "Capital Contribution" Bank Account

    You should find out from the securities firm of your choice which bank they are affiliated to before opening a bank account. Theoretically, you can open a bank account in any of the many banks in Vietnam but usually securities firms have an arrangement with 1 or 2 banks that they prefer (indeed, some banks have securities firms that are their subsidiaries) and the account opening process/money transfer process could be expedited. Again, if the bank is "affiliated" to the securities firm, the latter will usually provide the necessary forms for you.

    1. Application for bank account opening (1 copy). This is a current account for the currency of your country of origin or in USD. This is the account that you will transfer money into when you TT funds to Vietnam.
    2. Application for "Capital Contribution Account" opening. This is denominated in VND. This account will be the one that transfers VND to your stock trading account.
    3. Authorization letter (2 copies). This instructs the bank to authorize your securities firm to transfer money into and out of your stock account under your authorization if you want to transfer money back to your home country.

    Most securities firms will just need a PDF copy of the above mentioned forms to be completed and emailed to them and they will process these for you. The other option is to snail mail the forms to Vietnam.

    That's all!

    Once the forms are received by your securities firm, they will check the accuracy and then commence the account application process. It usually takes between 2 weeks to 1 month for the entire process. Once this is done, you will be informed of your bank account, capital contribution bank account number and how to TT your funds to Vietnam. You will also be given a securities trading code and login ID/password to your stock trading account.

    Looking for Information on Companies

    Financial information on the companies listed in Vietnam is plentiful and available on request from the securities companies. Many of the securities companies have this information on their website as well. While there are translations available for some companies and there is a trend for some companies (especially big cap ones) to post their financial information and shareholder communications in English, most of the information will be in Vietnamese.

    I have included a translation of the most common financial terms that you will encounter in Vietnamese into their English equivalent in this document on reading Vietnamese financial reports. I trust that you will find it useful.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: market-outlook Stocks: EEM, VNM
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Comments (4)
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  • Schumpeter_1
    , contributor
    Comments (211) | Send Message
     
    Thanks !
    Especially for the translations...
    11 Apr 2012, 05:30 AM Reply Like
  • Futures Asia
    , contributor
    Comments (20) | Send Message
     
    Author’s reply » No problem :)

     

    hope that it will be useful for everyone!
    12 Apr 2012, 06:09 AM Reply Like
  • MacroLion
    , contributor
    Comments (10) | Send Message
     
    Who's trailing platform is the best among the brokers in your list?
    5 Jan 2013, 10:19 PM Reply Like
  • Futures Asia
    , contributor
    Comments (20) | Send Message
     
    Author’s reply » Hard to say, now many brokerage firms have excellent trading platforms.
    6 Jan 2013, 08:44 AM Reply Like
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